Story of SAB 101

- The preparation of financial reports…requires that the accountant exercise judgement.…There is some flexibility,…some estimation in the reported numbers.…- Earnings management is the strategic use…of this flexibility to boost reported numbers…in order to look better.…To banks, to potential investors, or for a manager's…internal performance evaluation.…- Outrageous earnings management can ruin…the usefulness of the financial statements.…The statements don't tell what happened.…Instead, they tell what management…wants you to think happened.…- Because the computation of net income…begins with total revenue,…the measurement of revenue is fundamental…in the practice of accounting,…and is a tempting target for earnings management.…

- Consider in the late 1990's,…internet usage was just taking off.…Investors were excited to put their money into…any company that had an internet connection.…- In this euphoric environment,…where investors were willing to pay billions…for companies reporting even a hint of…internet related revenues,…

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10/26/2015

Revenue recognition determines when a sale should be recorded: This month or next month? This year or next year? This seems like an easy question until you consider situations in which a company sells a package of goods and services for one joint price, aka multi-element transactions.

But without recognizing revenue, a company can't hope to report any profit. Accordingly, company management is typically under great pressure to recognize revenue as soon as possible. Want to understand these concepts better? Join professors Jim and Kay Stice as they introduce the theory, practice, and implications of revenue recognition. Together they demonstrate how this seemingly innocent accounting topic can turn a reported profit into a reported loss, sometimes with multibillion dollar implications for company values.

Lynda.com is a PMI Registered Education Provider. This course qualifies for professional development units (PDUs). To view the activity and PDU details for this course, click here.The PMI Registered Education Provider logo is a registered mark of the Project Management Institute, Inc.